THE CPSC INFORMATION DATABASE GOES ONLINE NEXT MONTH!
For the past year RRS has been telling clients that the CPSC database is coming and that time is fast approaching. Notwithstanding several delays the time has finally arrived. It is now scheduled to go active online March 11, 2011 and with it comes a new tool for plaintiffs and their attorneys to use against manufacturers, importers, and private labelers (“Manufacturers”). The searchable consumer product safety complaints database is the result of the Consumer Safety Protection Improvement Act (CPSIA) which Congress passed in 2008 in response to issues primarily related to imported products especially children’s toys that contained unsafe levels of lead. As usual in their zeal to address one high profile problem the legislators cast a wide net.
One aspect of the CPSIA of 2008 directs the CPSC to provide a way for consumer complaints regarding products subject to CPSC jurisdiction to be available in a searchable public database. The database will be searchable by manufacturer and product name. It is designed to be very user friendly. Reports of harm may be submitted by users of products and their attorneys, consumer groups and those who merely observe others using products. In other words, anyone, particularly anyone with an agenda can submit a report. This database is a veritable gold mine for some and minefield for many.
The database will contain “reports of harm” which can include any injury, illness or death or even simply the risk of injury, illness or death relating to the use of a consumer product. Reports of harm must include the following information: description of the consumer product; identity of the Manufacturer; description of the harm; incident date; category of the submitter (includes: consumers, governmental agencies, healthcare professionals, child care service providers and public safety entities); contact information verification and consent. There is no requirement that the CPSC verify these reports in any way. However, the CPSC is required to transmit the report to manufacturers within 5 business days of receiving it. The burden is exclusively on manufacturers to correct false and misleading reports.
Recognizing that some complaints are not well founded, the rules afford an opportunity for the manufacturer to respond. For the CPSC to consider the response before the complaint is made public, the rules require that the Commission receive a manufacturer’s input within 10 days of the CPSC sending the notification. Otherwise, the complaint becomes public regardless of its veracity.
Recognizing that the decked is stacked and the CPSC is holding all the aces it is imperative that Manufacturers register on the CPSC’s Business Portal. Doing so will allow Manufacturers to receive electronic notification of any complaint. Manufacturers that do not sign up will receive notice by mail, however, for a response to be considered it still must be received subject to the ten day rule. Registration is online and allows companies to designate primary and secondary contacts, and affords Manufacturers to opportunity to respond in the timeliest manner. Registration can be done at http://www.saferproducts.gov.
Even if a consumer’s report of harm is materially inaccurate, and a manufacturer submits a comment in a timely manner, the CPSC will still publish a report if no determination has been made before the ten day deadline. The Commission defines material inaccurate information to mean that is must be false or misleading and be substantial and important as to affect a reasonable consumer’s decision making about the product.
This applies to both consumer reports and to manufacturer’s comments.
Given the rules of this game, time is clearly of the essence. However, Manufacturers comments will be published with the consumer product safety complaint as long as the correct procedures are followed. The CPSC procedures requires that the comment must: 1) relate to specific information within the report; 2) state the unique identifier provided by the CPSC; 3) verify that the report and comments were reviewed by the manufacturer and are true and accurate; and 4) the manufacturer must affirmatively request publication of the comment.
Consistent with past Commission practice Manufacturers may request that portions of a report be designated confidential. Once again the burden is on the manufacturer who must follow specific procedures in order to gain confidentiality. The manufacturer must 1) specify which portions should be confidential and demonstrate harm if released; 2) submit the request prior to the 10 day deadline and 3) agree to assist the Commission in the defense of any judicial proceeding that thereafter might be brought to compel the disclosure of said information.
Needless to say this system will be onerous to many manufacturers and the potential for it to be abused will be great. RRS can help you meet the challenge of responding to CPSC reports in a timely and effective manner. As part of our special project services we will register your company with the CPSC and work with you to plan for and respond to complaints. Please contact Paul if you are interested in taking a proactive approach to managing this source of government sponsored public exposure.
ACTIVITY REPORT
Over the past quarter RRS closed 58 claims including six lawsuits and 43 non-litigated claims.
Four of the lawsuits were controlled by RRS, and of those three were dismissed without any payment to plaintiffs and their lawyers. There was one lawsuit which was settled. Plaintiff came to mediation and demanded $600,000. Mediation failed. We offered $2,500 as a statutory offer, so that we could recover all expert witness fees from plaintiff. Plaintiff accepted the $2,500 settlement offer.
The other three lawsuits were settled by insurers. In one product case, the plaintiff’s expert opined that there was a defect in the product, but that the defect was not related to the accident. The insurer settled for $300,000. In another products case, the clamant asserted that the ladder became unlocked and collapsed. The expert had no opinion as to how or why the ladder could become unlocked, but since that is what plaintiff said, the ladder must be defective. The insurer paid $185,000 to avoid trial in that case. In a premises/resort case, the insurer settled for $62,500. The claimant was snow tubing, and maneuvered her tube to try to go over a berm. Although told to slow down at end, she was finally successful in going over the berm … and she was injured. All standards were met, but the cost of trial exceeded the settlement amount, in the judgment of the insurer.
In none of the above-cases did the client have a consent clause that would have avoided the settlements. The May 2011 RRS Newsletter is slated to have a detailed article describing the importance of consent clauses and how you need to ask for them to be included in your insurance policy. We have yet to find a carrier offering a consent clause in its standard policy terms. As is generally the case in life, you won’t get goodies unless you ask.
Of the 43 claims, 38 were closed with no payment to the claimant. Five claims were settled for a nominal sum by minimizing the settlement amount and expenses. The average settlement amount per settled claim was $298.00 in the last quarter.
YOUR COMPANY NEEDS TO TESTIFY AT DEPOSITION/TRIAL:
NOW WHAT?
One of the certainties of business is that at some point, someone, is going to bring a legal action against your company. The federal courts and virtually all state courts allow for the deposition of corporate representatives. Federal Rule of Civil Procedure that governs this process is 30(b) 6. As such, corporate reps are often referred to as 30 (b) 6 witnesses. You may have already served in this capacity, but the lessons addressed below have been a pitfall for one or more of RRS’ clients’ testimony, and are not merely theoretical examples of problems that can arise.
Who Should Be The Corporate Representative?
In most cases, the company can choose its corporate representative. Although the plaintiff may require that a particular individual testify, they usually instead serve a corporate subpoena, which permits the company to select the person who will testify.
The deposition request generally includes a list of subject matters to be covered. This allows the company to identify the proper persons to testify. The representative should either have first-hand knowledge for each topic, or must learn about them.
The company is permitted to use separate representatives for each topic. If there is a topic regarding sales, the person to testify on this issue may be the sales manager. If another topic is, for example, quality control, the company might designate the production manager or an engineer.
At trial, you may decide to use one well-spoken individual to testify on all matters. But for a deposition, which will become a cold, black-and-white transcript, you may want to have several people testify in their areas of specialty. Before trial, the company designated corporate representative will have an opportunity to review the others depositions to familiarize him or her with all prior testimony in the case.
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So, You Have a Case in Canada, Eh?
Litigation in Canada is different. Some politicians tout its “Loser Pays” philosophy. But, Canada’s theoretical advantages as a litigation forum are undermined by practical realities. In the end, there are advantages and disadvantages but, without a doubt, it is “different.”
Loser Pays – Sort Of
Canada has long had a system of “Loser Pays,” much touted by tort reform activists. Indeed, this system has been successfully used by Risk Retention Services in two cases, one in which a gymnastics supply company recovered $50,000 from the plaintiff, and the other time successfully convincing the plaintiff to dismiss his case rather than face the possibility of paying the defendant’s attorney fees. These experiences are, however, far from the norm.
First off, the amounts of attorney fees that are ordered to be paid are up to the discretion of the trial court. It is not unusual for the trial court to order that the defendant pay virtually all of the plaintiff’s attorney fees, but only a modest portion of defense fees when a defendant prevails. There are mechanisms for maximizing the potential recovery, but since the Canadian system, in practice, is far less adversarial than in the United States (addressed below), these methods are rarely employed.
Even where the court does order the plaintiff to pay fees, this is not a real victory, for it is a rare claimant indeed who has any money to pay for such a judgment. Thus, while you get a court order requiring the plaintiff to pay, it often is a judgment proof order. These realities are explained to claimants by their attorneys, so unless the claimant has assets (including a home) the threat of pursuing costs is not always taken seriously.
The rarity of such a claim can be seen in our two cases (two different provinces), and was argued at mediation. The mediators in both cases had never before heard of a defendant actually holding out for attorney fees.
In the gymnastics case, the plaintiff, after much cajoling, agreed with the mediator’s recommendation that she dismiss her claim. The equipment company we represented refused to allow the case to be dismissed without the payment of most of the attorney fees. This tactic worked because the claimant, a daughter of a parliamentary MP, had assets.
Normally, however, the “Loser Pays” system merely increases the cost of settlement. The plaintiff almost never pays and does not take such a threat seriously. But the plaintiff attorney, from the outset, adds his fees to the top of the settlement demand (so a case that should settle for $100,000, would settle for $100,000 plus attorney fees).
Initial offers are thus unreasonably high, and even in mediation, the mediator will never try to discount the fees. Thus, the system is really a “defendant pays” attorney fees. Not surprisingly, this actually promotes litigation, rather than limits it. The attorney has nothing to lose by taking the case (most cases settle), and the recovery to the plaintiff is maximized, because attorney fees are routinely added to any settlement.
Less Work – More Money
In Canadian lawsuits, there are only pleadings (summons, petition, answers); and production of documents (not the documents others request, documents we want to use in the trial). There are also “discoveries”, the Canadian word for “depositions”.
Discoveries in Canada are limited to parties, and the party gets to pick who will testify. It is not unusual for the party to select an officer who knows nothing about the product or litigation. When a witness does not know an answer, an “undertaking” is demanded. This means that the party asking the question at the deposition requires that the party “undertake” to answer the question, or provide a document, that was not available at the deposition.
In practice, this means that very little information is provided at the discovery, and everything can be reviewed and answers drafted by the attorneys. This is similar to interrogatories in the United States. Meanwhile, absent a court order, there can be no depositions of witnesses including co-workers, family members or treating physicians. Experts, including physicians, provide bare-bones reports, and everything else is left to the imagination of the parties until trial.
Thus, there is truly far less work to be (or can be) done by the attorneys in Canada. Meanwhile, it takes years for a case to get to trial, and virtually no trials are heard by juries. In most cases, there is a right to a jury trial, but it is rarely employed unless the client demands it.
Still, litigation in Canada costs far more in Canada than the United States. Experienced trial lawyers routinely charge $400-$600 per hour, and these attorneys use lowly associates (typically $250-450/hour) to work up the case. There are letters between counsel, and numerous court status conferences (during which time nothing has been done).
The concept of bringing motions to compel is completely foreign, even when the limited discovery available is permitted. Normally, the discoveries of the parties have to be completed within 1 year, but the parties almost never get around to completing these discoveries on time. Further, there are delays in obtaining medical examinations due to the Canadian medical system’s shortage of doctors.
Thus, while less work is performed, the litigation often costs more to perform. Perhaps it is the delays and costs of litigation, but in Canada, virtually all civil cases are resolved short of trial, usually at mediation. This includes product liability cases that would normally be tried in the United States.
Typically, Canadian juries are more conservative and, remember, whether in settlement or verdict, the losing defendant must pay attorney fees.
In short, there are some advantages to the Canadian system. You will be required to do far less work to prepare for discovery, and experts will never be deposed. On the other hand, trial by ambush is always a difficult concept to get your hands around, and, even though far less work is performed, the attorney fees are routinely far higher than in most American jurisdictions.
The Canadian system has advantages, and disadvantages, but most of all, it is just – different.
ACTIVITY REPORT
Over the past quarter RRS closed 22 claims including 12 lawsuits and 10 non-litigated claims.
Four of the lawsuits were tried to verdict. In all four cases, a jury returned a defense verdict. One additional lawsuit was dismissed with prejudice.
Risk Retention was involved in the settlement of five claims. Three involved defective products, two were settled for the cost of defense or less. The litigation claims settled by RRS were settled for an average of $57,000.00.
Two claims were settled by an insurer. One involved a strained neck, which the insurer settled for $19,599 (this insured had a $20,000 deductable). The other was a ladder claim. There was a video of the accident that did not show the ladder ever failing, instead, it was consistent with our experts’ opinion that the plaintiff simply fell onto the ladder. Still, the insurer settled that claim for $500,000 at mediation.
Of the ten claims, two were settled for an average of $4,750 between them. The other eight were resolved without payment of any money.
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